Newt Gingrich

Former House Speaker; Chairman of Gingrich 360

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Opinion

US should eliminate taxes on server tips

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Newt Gingrich

Former House Speaker; Chairman of Gingrich 360

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In the United States, restaurant servers are paid below minimum wage and earn the majority of their incomes from tips left by customers. Even after accounting for these tips, a 2015 analysis concluded that the total median hourly income for a server in the U.S. was just $13, while bartenders earned only $9.

Former President Donald Trump recently suggested eliminating all taxes on server tips, which might alleviate some of the pressures these workers face. The price tag attached to that proposal, however, could add an additional $500 billion to the U.S. deficit over the next 10 years.

Watch the above video as Straight Arrow News contributor Newt Gingrich recalls a conversation between Donald Trump and a waitress where the waitress said he’d have her vote if he could just eliminate the taxes on tips. Gingrich explains why this actually might be a good idea to explore.


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The following is an excerpt of the above video:

Second, I think that it’s a very powerful idea because it encourages people to work. I mean, one of the nice things about tipping is that if somebody does a really good job, you tip them a little bit more, they do a bad job, you don’t tip them at all. So it creates a sense of merit, that people have an incentive to pay attention to the customers. And I think that’s good, I think we should be encouraging that.

Third, by eliminating the tax on tips, you’re increasing the work incentive. And in fact, I think that’s a very important component. We’re getting ourselves out of the mess we’re in, in terms of food stamps, public housing, dependency, you know. It got so bad that in a referendum in San Francisco, over 60% of the city voted that you would have to take a drug test to get any kind of welfare or any kind of assistance. And that’s just because they’re fed up with people who sit around doing nothing, taking drugs, making the city uninhabitable, and then show up and expect you to take care of them.

Well, we had this parallel in requiring work when I was speaker. The Welfare Reform Act of 1996 required people to go to work or be studying. Similarly, what this will do is it will encourage people to work because they’ll get to keep the money. It will be a step away from a dependency welfare state back towards independence and the work ethic.

[Newt Gingrich]

New developments and policy came from President Donald Trump. I was with him for three different meetings with the House, the Senate and the round Business Roundtable CEOs. And in all three meetings, he said, You know, I have this new proposal. He said, Now, let me be clear, didn’t come from a think tank to wasn’t well thought out by experts. He was in Nevada, staying at a hotel, went to a restaurant, and said to the waitress, who was serving him, what do I need to do to get your vote? And she said, eliminate the tax on tips. And he said, What What do you mean? And she said, Well, Biden has hired 1000s, of new IRS agents. And they’re going to come after people like me. And they want me to record every single penny, I’m given his tips, file all sorts of paperwork, so they can come and audit me. And she said, frankly, I don’t want them to have my money, because I work hard. And he said, Well, what if we just eliminated it? And she said, Well, then I guarantee you, I’m gonna vote for you. And he thought about it. And the more people I’ve talked to Grover Norquist is probably the leading conservative activist against tax increases, and in favor of a lower tax rate came out very strongly in favor. And there’s a reason not only does eliminating the tax on tips, save a great deal of bureaucracy. The interesting to find out, for example, the 88,000, new IRS agents, how many could be eliminated, and their salaries and, and health insurance, and pensions, saved to the taxpayer, by not having them go after people who, on average, earning about $6,000 a year in tips, think about that $6,000 a year in tips, and you’re supposed to fill out all this paperwork. Second, I think that it’s a very powerful idea. Because it encourages people to work. I mean, one of the nice things about tipping is that if somebody does a really good job, you tip them a little bit more, they do a bad job, you don’t tip them at all. So it creates a sense of merit, that people have an incentive to pay attention to the customers. And I think that’s good, I think we should be encouraging. Third, by eliminating the tax and tips, you’re increasing the work incentive. And in fact, I think that’s a very important component. We’re getting ourselves out of the mess we’re in, in terms of food stamps, public housing dependency, you know, I got so bad that in a referendum in San Francisco, over 60% of the city voted that you would have to take a drug test to get any kind of welfare or any kind of assistance. And that’s just because they’re fed up with people who sit around doing nothing, taking drugs, making the city uninhabitable, and then show up and expect you to take care of them. Well, we had this parallel in requiring work when I was speaker, the Welfare Reform Act of 1996. required people to go to work could be studying. Similarly, what this will do is it will encourage people to work because they’ll get to keep the money. It will be a step away from a dependency welfare state back towards independence and the work ethic.

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